On 13 February 2015 the Commercial Court (Richards J) granted the claimants (who were investment funds interested in euro-denominated debt securities issued by Argentina) a declaration that €225 million interest due on debt securities was subject to a trust governed by English law.

The case concerned certain euro exchange bonds governed by a trust indenture and English law. The indenture provided that Argentina irrevocably submitted to the jurisdiction of the English and Argentine courts with respect to any proceedings arising out of or in connection with the indenture as it related to debt securities governed by English law. In the indenture, Argentina also covenanted to pay the principal of and interest on the exchange bonds to the trustee, at the places and times and in the manner provided in the debt securities and the trust indenture.

Richards J held as follows:

  • In circumstances where there was so much dispute surrounding the attempt by Argentina to pay sums due on the exchange bonds, a declaration authoritatively stating the position under the governing law of the trust indenture and the euro debt securities was helpful.
  • The court was concerned not to intrude improperly into matters before the US courts. However, the making of a declaration in the terms sought by the claimants would not do so. The declaration would establish the status of the funds held by the trustee as a matter of English law. A declaration as to the effect of a trust indenture governed by English law was within the proper jurisdiction of the court.
  • A second declaration sought by the claimants, to the effect that a US freezing injunction did not prevent the trustee from paying out of the trust account, was however denied. A declaration in those terms served no useful purpose. It would be a declaration that the trustee would be in breach of trust unless it had a defence.

Knighthead Master Fund LP and others v The Bank of New York Mellon and another [2015] EWHC 270 (Ch), 13 February 2015